FTSE Tracker or something else.....
Discussion
Jon39 said:
You two are having quite a tussle about which performs better, invest at once, or drip in gradually.
Edited by Jon39 on Sunday 23 July 19:39
Someone else has been banging on about performance and citing 20/30 year time horizons while wholly negating the original criteria, then posting retail advertorials and not really getting how advertising works.
Jon39 said:
You two are having quite a tussle about which performs better, invest at once, or drip in gradually.
I have not thought about these two ways, but my own portfolio might provide a clue to the answer.
The results achieved are average 14.16% pa over 29 years (incl. divs received each year, but not reinvested).
It probably became fully invested about 20 years ago, and after that there have been very few changes to the holdings.
Therefore, from 20 years ago, if the investment was put in each month, only reaching full investment now, there would have been less money invested throughout, until this year. With an unchanged portfolio, the percentage results would have been identical, but as the total sum invested would have been lower throughout, the Pound value of the portfolio would now also be lower.
That is how I see it, but if a fund had too many negative years, then the answer might be different.
An interesting point to debate, but I think looking for good businesses might be more important, and rewarding for investors.
DogRough said:
As opposed to someone who doesn't understand how pound cost averaging works 
That doesn't even make sense. There hasn't even been a discussion about the specific mechanics of the process!https://en.m.wikipedia.org/wiki/Dunning–Krug...
DogRough said:
As opposed to someone who doesn't understand how pound cost averaging works
To be fair that appears to apply more to you than to DonkeyApple, given that you previously claimed:DogRough said:
Pound cost averaging is actually busted as a theory, time in the market historically outweighs the PCA benefits.
PCA has always been about managing risk and not about maximising potential returns, do our comment makes no sense.sidicks said:
No, that would only be the case if the return had been consistent throughout the period. If the actual returns had been volatile then the overall return achieved would be quite different between the two scenarios.
Correct - I thought someone might spot that. -
When returns are variable, which scenario is better, I think could probably only be known at the very end of the investment period.
Even so, having beaten the Index (FTSE All-Share) during 24 of the last 29 years, including every down year, I think I did better to be fully invested from fairly near the start, rather than be making gradual contributions throughout that very long time period. Some risks I study carefully, other risks I can accept and don't worry about them, PCA being one. Anything to do with trying to time the market, often tends to be a gambling game. I don't even know whether the market is going to go up or down tomorrow (does anyone), so I would not be a good gambler.
With the PCA method, I suppose that I would also have been continually paying extra charges, gradually making hundreds of purchase transactions. Good for the brokers, but not so good for my investment performance. Other than corporate actions (no fees), I rarely ever need to do transactions.
Edited by Jon39 on Sunday 23 July 23:23
DogRough said:
All of which just goes to prove that time in the market, rather than PCA, is the better strategy. So much for managing risk, unless you want to manage the "risk" of getting a better return on your investment that is.
It proves no such thing.And if the market falls 25% half-way through your investment period, which approach do you think will suffer the biggest drawdown?
DogRough said:
And some people think that investment platforms use "advertorials" to encourage people not to incur multiple dealing fees...
I think you're very confused about what was being claimed.Lump sum. Full spread paid up front and booked to accounts. Drip feeding denies that benefit and also accrues greater admin costs which is why we used to apply min tickets to compensate for that loss.
And that does not even take into account the client retention aspect where a lump sum investor is retained for far longer and for far less expense than the client who scales in who is a much higher risk of leaving within the initial 6 months before you've earned enough to even begin to cover your client acquisition costs.
Ergo, in many cases the drip feeding client will be loss making to a brokerage now min tickets are mostly gone and we've had the race to the bottom on spreads and fees.
And that does not even take into account the client retention aspect where a lump sum investor is retained for far longer and for far less expense than the client who scales in who is a much higher risk of leaving within the initial 6 months before you've earned enough to even begin to cover your client acquisition costs.
Ergo, in many cases the drip feeding client will be loss making to a brokerage now min tickets are mostly gone and we've had the race to the bottom on spreads and fees.
Edited by DonkeyApple on Monday 24th July 13:43
So angry and offensive.
Like on the other thread where your rage got you all confused, why don't you take another five minutes to quickly calculate the cost difference to the broker on lump summing £10k verses feeding it over say 12 monthly periods when a fixed % is charged and there is no minimum ticket applied?
Feel free to show your workings with as much abuse as you care.
Like on the other thread where your rage got you all confused, why don't you take another five minutes to quickly calculate the cost difference to the broker on lump summing £10k verses feeding it over say 12 monthly periods when a fixed % is charged and there is no minimum ticket applied?
Feel free to show your workings with as much abuse as you care.
sidicks said:
And if the market falls 25% half-way through your investment period, which approach do you think will suffer the biggest drawdown?
I do not know you, or what your investment preferences and strategy might be.
Your reference above though, is probably just an example to illustrate your point, not a suggested strategy to help during market crashes.
The mention of 25% market falls reminds me, that the right mental attitude is very important for equity investors.
As a portfolio grows, gaining or losing £10,000, £20,000 and £30,000 in one week, can become a regular occurrence.
If a person might be kept awake at night by such (paper) losses, then it is unwise for them to get involved with equity investment.
In 1987, 2000/2001/2002 and again in 2008, a 25% market fall was simply the hors d'oeuvre, to much bigger falls. It was 40% in 2008.
Panic selling becomes widespread, but the problem those sellers then face, is gambling about just when to buy back in. When the genuine upturn begins (not the earlier false ones) it usually happens very rapidly. Staying in the market has proved best many times. Look at a long- term index chart and now, the 1987 crash only shows as a tiny dip. It was the 'end of capitalism' at the time. In addition to staying invested, there are some wonderful opportunities available during the big market crashes, to buy into good solid businesses, at very low prices. It is easier to spot when a business is cheap, than expensive, and you do not even need to do your buying at the market low point (which you will only know afterwards anyway).
We have gone away from the topic somewhat, so here is my direct answer to the OP's original question.
FTSE Tracker or something else?
As you can see from the chart, my answer is clearly, 'something else'.
Long-term stakes in selected, non-cyclical, defensive, global FTSE 100 businesses.
The 2016 bars illustrate perfectly, the performance difference that can occur, between FTSE 100 global businesses and the whole Index. The fall in the value of Sterling being the reason of course.
Edited by Jon39 on Monday 24th July 14:27
Jon39 said:
We have gone away from the topic somewhat, so here is my direct answer to the OP's original question.
FTSE Tracker or something else?
As you can see from the chart, my answer is clearly, 'something else'.
Long-term stakes in selected, non-cyclical, defensive, global FTSE 100 businesses.
Ratesetter is currently paying 3% with 1 month access so I'm going to stick some more in there. With the rest it's definitely going to be a tracker/basket/fund of some kind. I have relatively low risk appetite with this bit of money and i think selecting specific stocks is going to present more risk than going for a basket of funds.
Thanks all
JAWBEE!!! WHAT HAVE I TOLD YOU!!!
You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise)
You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise
)Edited by drainbrain on Monday 24th July 16:57
DogRough said:
drainbrain said:
JAWBEE!!! WHAT HAVE I TOLD YOU!!!
You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise)
Guess it all depends on how many little girlies go telling tales. I'll leave that up to you, dogbreath You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise
)Edited by drainbrain on Monday 24th July 16:57
Sitting waiting for anyone who can't be assed with you to click the 'report' button, and .......PTOOF!!!!
JAWBEE flushed!!
Edited by drainbrain on Monday 24th July 17:14
DogRough said:
drainbrain said:
Well for a man as well-versed in risk as you that's a bit of a precarious position you've put yourself in, is it not?
Sitting waiting for anyone who can't be assed with you to click the 'report' button, and .......PTOOF!!!!
JAWBEE flushed!!
Lol, your listening skills really are appalling Sitting waiting for anyone who can't be assed with you to click the 'report' button, and .......PTOOF!!!!
JAWBEE flushed!!
Edited by drainbrain on Monday 24th July 17:14
I keep telling you, you are confusing me with someone who gives a s
t 
Jon39 said:
I do not know you, or what your investment preferences and strategy might be.
Your reference above though, is probably just an example to illustrate your point, not a suggested strategy to help during market crashes.
The mention of 25% market falls reminds me, that the right mental attitude is very important for equity investors.
As a portfolio grows, gaining or losing £10,000, £20,000 and £30,000 in one week, can become a regular occurrence.
If a person might be kept awake at night by such (paper) losses, then it is unwise for them to get involved with equity investment.
In 1987, 2000/2001/2002 and again in 2008, a 25% market fall was simply the hors d'oeuvre, to much bigger falls. It was 40% in 2008.
Panic selling becomes widespread, but the problem those sellers then face, is gambling about just when to buy back in. When the genuine upturn begins (not the earlier false ones) it usually happens very rapidly. Staying in the market has proved best many times. Look at a long- term index chart and now, the 1987 crash only shows as a tiny dip. It was the 'end of capitalism' at the time. In addition to staying invested, there are some wonderful opportunities available during the big market crashes, to buy into good solid businesses, at very low prices. It is easier to spot when a business is cheap, than expensive, and you do not even need to do your buying at the market low point (which you will only know afterwards anyway).
drainbrain said:
JAWBEE!!! WHAT HAVE I TOLD YOU!!!
You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise)
You should have had a tenner on it. You've lasted 9 days so far which is a record compared to Twit-for-Tw4t and Hyena.....
...but you do know when Big Al finds you've sidestepped his size 10 and snuck back in thru the fire door you'll be for the Dog Pound.
I'd say by Wednesday. Care for a quid on it? (I'd have said a tenner but I know you're a bit low-end cash wise
)Edited by drainbrain on Monday 24th July 16:57
sidicks said:
Which is exactly the point when pound cost average will provide a benefit by buying more shares at a lower price....
I know the theory of how it works, but if you refer to my performance bar chart, I would be impressed if you can say what the performance improvement would have been. Just 5 annual negatives in 29 years, is not an average performance.
PCA works well by disciplined buying, when prices are lower.
As it has only happened for me five times, those are the years when buying would have really worked well.
Three of the those five occasions were major market crashes, so every night the BBC news were talking about the stock market disaster. Even an average Joe therefore knew share prices were lower. I obviously increased my holdings heavily during those crashes. It is funny, that when those opportunities become so obvious, doing the opposite to the majority can work very well. You do need a strong will though to be able to do it. The magnitude of the last recession was a really big, so I did wonder if everything might collapse, but did muster enough courage to do buying.
Many novice investors tend to buy, when people start talking about how much they have made after buying their shares.
A market downturn arrives, they then get frightened and sell.
Buying high and selling low. Oh dear.
Those are just the people who certainly would benefit from PCA, because it provides them with a disciplined process.
If serious investors have the experience and ability to have achieved a record of good performance, then they certainly should be able to make their own decisions, about when to increase their holdings.
Jon39 said:
I know the theory of how it works, but if you refer to my performance bar chart, I would be impressed if you can say what the performance improvement would have been. Just 5 annual negatives in 29 years, is not an average performance.
Jon39 said:
PCA works well by disciplined buying, when prices are lower.
As it has only happened for me five times, those are the years when buying would have really worked well.
Three of the those five occasions were major market crashes, so every night the BBC news were talking about the stock market disaster. Even an average Joe therefore knew share prices were lower. I obviously increased my holdings heavily during those crashes. . It is funny, that when those opportunities become so obvious, doing the opposite to the majority can work very well. You do need a strong will though to be able to do it. The magnitude of the last recession was a really big, so I did wonder if everything might collapse, but did muster enough courage to do buying.
So in fact you hadn't fully invested initially, as you has some money in reserve to add to your equity holding following the crash!As it has only happened for me five times, those are the years when buying would have really worked well.
Three of the those five occasions were major market crashes, so every night the BBC news were talking about the stock market disaster. Even an average Joe therefore knew share prices were lower. I obviously increased my holdings heavily during those crashes. . It is funny, that when those opportunities become so obvious, doing the opposite to the majority can work very well. You do need a strong will though to be able to do it. The magnitude of the last recession was a really big, so I did wonder if everything might collapse, but did muster enough courage to do buying.
So effectively you did PCA...
Jon39 said:
Many novice investors tend to buy, when people start talking about how much they have made after buying their shares.
A market downturn arrives, they then get frightened and sell.
Buying high and selling low. Oh dear.
Those are just the people who certainly would benefit from PCA, because it provides them with a disciplined process.
If serious investors have the experience and ability to have achieved a record of good performance, then they certainly should be able to make their own decisions, about when to increase their holdings.
And buying more when prices are lower is PCA in action!!A market downturn arrives, they then get frightened and sell.
Buying high and selling low. Oh dear.
Those are just the people who certainly would benefit from PCA, because it provides them with a disciplined process.
If serious investors have the experience and ability to have achieved a record of good performance, then they certainly should be able to make their own decisions, about when to increase their holdings.
If you had been following your own advice - then you would already have been fully invested prior to the crash!!
For me, like many, I have a pension which by its basic set up of taking a % of monthly salary works on PCA. Ironically, most of us would probably be happier to invest £1m on the day we set up our first pension rather than drip £1m in over 45 years.
Over much shorter periods such as 5-10 year savings plans you become much more susceptible to market timing. You are, after all, slap bang in the middle of the mythical 7 year cycle so utilising a mechanism to step progressively into the market becomes the more suitable option.
And then you shorten the horizon even further to that of a typical non blue chip equity investment and the benefits of some form of averaging in becomes quite clear to most punters who lobbed their savings into some AIM stock that is now back trading at 1p.
My personal style as I don't have time to trade (and I don't have the temperament for it anyhow) and my investment side is covered by others is that I will look for a major market that has either clearly peaked or clearly bottomed and begin scaling in over suitable price movements once the new trend looks in place. If I get the timing wrong then I'm stopped out of a very small block of positions but if the trend is right then it simply keeps on adding positions, building exposure and gains until the limits are hit and it closes out. This worked well for Gold in 2013, DAX in 2015 and Oil in 2016.
Over much shorter periods such as 5-10 year savings plans you become much more susceptible to market timing. You are, after all, slap bang in the middle of the mythical 7 year cycle so utilising a mechanism to step progressively into the market becomes the more suitable option.
And then you shorten the horizon even further to that of a typical non blue chip equity investment and the benefits of some form of averaging in becomes quite clear to most punters who lobbed their savings into some AIM stock that is now back trading at 1p.
My personal style as I don't have time to trade (and I don't have the temperament for it anyhow) and my investment side is covered by others is that I will look for a major market that has either clearly peaked or clearly bottomed and begin scaling in over suitable price movements once the new trend looks in place. If I get the timing wrong then I'm stopped out of a very small block of positions but if the trend is right then it simply keeps on adding positions, building exposure and gains until the limits are hit and it closes out. This worked well for Gold in 2013, DAX in 2015 and Oil in 2016.
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